EUR/JPY Explodes Higher; May Consolidate
We bought EUR/JPY last week near 116.60 on a breakout above a small trend channel. The pair has worked higher in strong fashion signaling that we may be in a third wave higher. Third waves tend to be the longest and the strongest of the five wave Elliott Wave sequence so we will tighten the stop loss closer to the current price action in case the market turns against the position.
EUR/JPY is starting to bump up against a longer term price channel (blue line) near 122. This blue trend line may create a reaction lower towards 119. Since we may be in a third wave, a retracement may not reach all of the way to 119, but a retracement this deep is normal within the identified pattern.
We are anticipating an eventual break higher outside of the blue trend channel to retest 124 and possibly 133. The current stop loss is set near 117.82. If this level breaks to the downside, then another pattern is at play.
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---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.